The federal government is lowering student loan interest and making the grace period before graduating students need to begin repaying their loans interest free.
The federal budget, announced today by finance minister Bill Morneau, will reduce floating student loan interest from prime plus 2.5 percent to just the prime rate. The fixed interest rate will be decreased from prime plus five per cent to prime plus two per cent.
The budget also proposes giving students a six-month grace period before loans begin accumulating interest.
“Budget 2019’s proposed changes to the Canada Student Loans interest rate policy will respond to today’s realities, including higher tuition, higher living costs and the changing nature of work faced by young workers,” reads the budget.
The changes are projected to cost the federal government $1.7 billion over the next five years.
Student unions across the country are celebrating the changes, which the federal government estimates will save the average borrower $2,000.
“The AMS is incredibly excited about the 2019 Federal Budget, which incorporates funding measures that will make a real impact on student lives across Canada,” said AMS VP External Cristina Ilnitchi in a statement to The Ubyssey.
“... This directly addresses the affordability of post-secondary education for low-to-middle income students and recognizes opportunities to support students.”
“Students are pleased that the government listened to their call, and has taken this important step towards mitigating student debt,” added BC Federation of Students (BCFS) Chair Aran Armutlu in a press release.
But the BCFS believes the federal government must go further to support education affordability. Citing the recent elimination of the provincial student loan interest by the BC government, the federation calls for “a complete elimination” of the federal student loan interest.
“With tuition fees at an all-time high, student debt in BC continues to grow as students and their families struggle to afford the education they need to enter the workforce,” Armutlu said. “Eliminating interest on student loans relieves some of the pressure faced by those who have to borrow to access education.”
The budget also includes measures to make loans and grants more accessible for marginalized students.
If approved, the budget would see an additional $15 million be invested into the Canada Student Loans Program to more than double the cap on grants for students with disabilities from $8,000 to $20,000.
The investment will also allow students with mental health or medical issues to take interest-free breaks from their studies for up to 18 months.
“This budget takes important steps forward and we’re excited to continue to work with different parts of the government to support more of these positive changes,” said Ilnitchi.
“... The AMS will continue to collaborate with student unions across Canada to advocate federally to make post-secondary education more affordable, accessible, and supportive for all students.”